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DATA-DRIVEN INVESTMENT RESEARCH

July 11, 2019

For years Warren Buffett has stayed away from the opinions of Wall Street in favor of the hard numbers one can find in a company’s financial statements. He’s rejected the inane complexity of New York City investment pundits for the serene simplicity of Omaha. He has used his knowledge of accounting and finance to uncover the durable competitive advantage of certain companies that have made him tens of billions over his career. Buffett, unlike his mentor Benjamin Graham, is not merely a value investor; although, if a value presents itself he certainly won’t shy away from it. Buffett and his Berkshire Hathaway (currentl...

January 18, 2019

I’ve never had someone famous write a letter to me. Then again, I’ve never really written a letter to anyone famous; that is until I wrote Mr. Bogle on March 7th, 2015. I had heard that he allocated several hours every week to reading and responding to letters. 16 days later, I received a letter from arguably the greatest positive influence on the investment industry to ever live. It read as follows:

“I’m happy with my role in building a better mutual fund industry.” What a role it was. How humble is that statement. If there were three character traits that set Jack Bogle apart from the rest, they would be humility, in...

September 29, 2018

Had you bet on Buffett back in 1965, you would’ve made 11% more than the S&P 500, compounded annually and including all dividends from those companies that issued one. Of course, back then no one knew that Warren Buffett was going to go on to build one of the most successful companies in the world, so placing a bet on him would’ve been akin to finding a needle in a haystack, except finding The Oracle would’ve paid vast sums more than finding the needle.

Berkshire Hathaway, the company Buffett built from essentially the ground up, had a gain in net worth in 2017 of $65 billion. That’s a staggering figure for merely one...

April 1, 2018

2017 was not the best for hedge funds. The average hedge fund returned 8.5% for the year, which isn’t all that bad if the risk-adjusted returns aren’t taken into consideration.1 But when you compare it against the S&P 500 return of 21.8%, it’s an embarrassment to an industry that markets its services based on the skill of its managers. A folly of sorts since skillful fund managers are few and far between. The investing public at large is disqualified from investing in hedge funds, and that’s probably a blessing in disguise. It’s the institutions and the high net worth individuals that are uniquely qualified to take th...

January 21, 2018

A real estate investment trust, or REIT, is a type of investment that allows people to pool their money to invest in a collection of real estate assets. So, instead of going out and purchasing a property, fixing it up, and renting it out to tenants, you would simply invest in a REIT to take advantage of both the cash flows and capital appreciation it might offer, without all the hassle of going it alone. The fiduciaries of a REIT have incentive to pay out at least 90% of all the income the REIT generates to not be taxed as a corporation. That income flows through to the investor in the form of a dividend. You sit back...

October 27, 2017

Only 17.62% of active large-cap funds outperformed the S&P 500 over the five years ending June 30, 2017. Yes, you read that right. The rest failed. In other words, if you had invested with a professional money manager who dedicated their life’s work to allocating your hard-earned money, they would have lost 82.38% of the time against a robot that essentially works for free by tracking the S&P 500. And this is nothing new. Granted, it was over five years, and during a relatively bullish time for the markets, but the numbers don’t vary much when you account for bear markets, shorter time frames, or different kinds of in...

October 1, 2017

Just with anything in life, mistakes will be made. It's no different when it comes to investing. The important thing to remember is that you learn from those mistakes and refrain from making them a second time around. It’s also just as important to learn from others’ mistakes. If someone you know has a terrible experience with a certain financial advisor, be sure to vet the next one you use. If someone you know invested in a very illiquid venture at a time that they needed the money, make certain that you take note of that the next time a major purchase is on the horizon. With that said, here are 5 very important inve...

September 8, 2017

"Don’t assume that a complex strategy is better than a simple strategy. The only thing extra complexity is likely to add is extra cost."

-Rick Ferri

It’s difficult to select just one piece of advice that Rick Ferri has offered over the years. He has written several books, including Asset Allocation and The Power of Passive Investing, which have both given investors a plethora of information on how best to navigate the markets. His advice couldn’t be more straightforward: keep it simple. There’s no reason to overcomplicate an investing strategy, especially when most of the time, an investor could buy and hold a basic S&P...

June 1, 2017

Conflicts of interest usually tend to nullify advice that is offered in good faith, whether it’s for monetary gain or not. The recipient of the advice wants to believe that conflicts are minimized and their best interests are at the forefront. Often this is not the case within the financial services industry, as the advisor is looking to maximize profits, sometimes at the unnecessary expense of their clients.

Listed below are some of the more notable pieces of advice, (in our opinion) and they all come from people who stood to gain nothing from sharing their expertise. Put differently, conflicts of interest were absen...

April 18, 2017

Every economic phenomenon has its day when the investing public turns its back and looks for an alternative way to make a return on one’s capital. Whether it’s hedge funds, real estate, or Exchange Traded Funds (ETFs), the popularity of these investment instruments wax and wane in accordance of where money has been made compared to where money will be made.

Take for example, passive investing, an investment strategy whereby an investor can simply buy a basic S&P 500 index fund, sit back, dollar cost average, and more likely than not come out ahead of someone who actively trades stocks, or buy and sells shares of f...

March 22, 2017

Wal-Mart is probably the most famous low-cost retailer in the world. It’s also one of the most successful. The ability of its founders and executive management team to consistently provide products at prices that millions of Americans can afford has made the proprietors and shareholders extremely rich. The Walton family is by far and away the wealthiest family in America with a combined net worth of nearly $150 billion. The Waltons knew that by controlling costs, they could maintain affordable prices for everyday goods that millions of people would purchase. With a 24.5% gross margin rate in 2014, Wal-Mart earns its e...

February 26, 2017

In the second part of this report, we'll discuss tax-advantaged accounts and specific investment products that can help minimize your tax liability. The most popular of all tax-advantaged accounts is the 401(k), named after the eponymous subsection of the Internal Revenue Code. The primary benefit of this account is the deferral of income taxes, as any dividends, capital gains, and a portion of your wages are not subject to current taxation. And when you do decide to distribute some of the funds for use—presumably during retirement—withdrawals are taxed at ordinary income rates, albeit at a rate which is most likely l...

February 11, 2017

When tax time comes, nearly everyone wants to minimize their tax obligation to the government. And they want to do it in the most economical way possible. The growth of online tax services will continue to grow as taxpayers have learned quite quickly that more traditional tax preparation services can be costly. Taxpayers want to legally keep every last dime from Uncle Sam, and they should. The average tax prep fee has been decreasing as the competition has only heated up over the past few years. Cost control is front and center when it comes to taxes, but seems to be nonexistent when investors decide to allocate their...

January 30, 2017

At the beginning of every year, you’ll find no shortage of pundits attempting to forecast the market for the ensuing twelve months. Each one has their own unique take on what they think will happen, despite the impossibility of actually being able to predict the future. But that’s what they’re paid to do, so one can hardly fault them for it. Upton Sinclair once said “it is difficult to get a man to understand something, when his salary depends upon his not understanding it.” Perhaps these market pundits are failing to understand that world events are random, and these events—to a large extent—drive the direction of th...

January 25, 2017

One word has caused much angst among lawmakers, financial advisors, brokers, and those seeking advice. And that word is fiduciary. A very general definition of fiduciary is a person who has an ethical or legal relationship of trust with one or more parties. There are several professions that necessitate a fiduciary standard of care, not limited to attorneys, doctors, real estate agents, bankers, and even executives of publicly traded companies. These individuals are always obliged to act ethically, and may even be legally responsible to act in the best interests of those who they serve. Each profession has varying deg...

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